Acting IRS Chief Steps Down After Rejecting Controversial Immigrant Data-Sharing Deal
The acting head of the Internal Revenue Service, Commissioner Melanie Krause, has announced her resignation after refusing to support a contentious agreement that would grant federal immigration authorities access to private taxpayer data—specifically targeting illegal immigrants.
Krause’s departure marks the third leadership exit at the IRS since the beginning of the year, deepening the agency’s leadership instability. Sources inside the agency say the turmoil stems from mounting political pressure, with senior officials allegedly prioritizing partisan objectives over the IRS’s long-standing commitment to remain a nonpartisan government entity.
The Deal That Sparked the Exit
On Monday, the IRS and the Department of Homeland Security finalized a data-sharing agreement enabling federal immigration officials to access taxpayer records to help locate undocumented immigrants.
According to The Washington Post, Treasury Department leaders—under whose authority the IRS operates—had been sidelining Krause for weeks, anticipating her strong opposition to the deal. Treasury Secretary Scott Bessent and Homeland Security Secretary Kristi Noem ultimately signed the agreement, despite repeated warnings from IRS legal counsel that it likely violated federal privacy laws.
“Melanie Krause has been leading the IRS through a time of extraordinary change,” a Treasury spokesperson said in a statement confirming her resignation, though notably omitting any mention of the controversial agreement. Instead, the spokesperson framed her tenure in the context of the agency’s efforts to “break down data silos” to combat waste, fraud, and abuse.
A Pattern of Resistance at the Top
Krause’s stance mirrors that of her predecessor, Doug O’Donnell, who stepped down in February after similarly refusing to approve an earlier version of the same deal. Before O’Donnell, Danny Werfel—the last Senate-confirmed commissioner—resigned on President Donald Trump’s first day in office.
Krause is expected to apply for the IRS’s deferred resignation program, according to a source familiar with her plans. Speaking anonymously, the source confirmed that her decision was partly motivated by concerns over the legality and implications of the newly signed agreement.
Sweeping Overhaul and Workforce Cuts
The resignation comes amid dramatic changes at the IRS. Just days ago, the agency began executing deep workforce reductions—dismantling its civil rights office and initiating mass layoffs that could cut up to 25% of staff. These cuts are part of a broader restructuring of the federal government spearheaded by President Trump and billionaire Elon Musk, who now heads the newly created Department of Government Efficiency (DOGE).
Since taking on the role, Musk has positioned himself as a disruptor, openly questioning the federal government’s fiscal management. Earlier this month, in an interview on Texas Sen. Ted Cruz’s podcast, Musk alleged the existence of what he called “magic money computers” inside the government—systems capable of sending payments “out of thin air” without adequate documentation.
Musk’s Explosive Claims
Musk claimed his DOGE team has uncovered 14 such systems within the U.S. Treasury and other federal agencies, with several reportedly housed at the Department of Health and Human Services, the State Department, and the Department of Defense.
“They just send money out of nothing,” Musk said, estimating that in some departments, reported spending could be off by as much as 5% of their total budgets when presented to Congress. Cruz suggested these discrepancies could add up to “trillions” in improper or undocumented payments.
Expanding on his claims, Musk argued that these hidden systems make it impossible for lawmakers to receive a truly accurate picture of government spending.
“You might think all government computers are synchronized, tracking every penny in real time. They’re not,” Musk said. “The numbers senators see aren’t the full story.”
A Clash Over Privacy, Law, and Power
Krause’s resignation now adds another layer of complexity to the unfolding story—one that intertwines immigration policy, data privacy, and federal spending accountability. While supporters of the data-sharing deal say it will help enforce immigration laws more effectively, opponents warn it sets a dangerous precedent for breaching taxpayer confidentiality.
As the IRS faces its largest internal shake-up in decades, the battle over its role in immigration enforcement—and the broader restructuring of the federal bureaucracy—shows no signs of cooling.